New plan to revamp the ACA would transfer federal funding of long-term care

Better outcomes and cost savings could be achieved if states exclusively funded long-term care for Medicaid beneficiaries, a prominent expert has proposed in a plan that would comprehensively transform the nation's healthcare system.

Avik Roy was Republican presidential candidate Mitt Romney's health policy advisor and is a senior fellow at the Manhattan Institute. A long-time critic of the Affordable Care Act, he released his plan for the country's future healthcare system on Wednesday. His “Universal Exchange Plan” puts forward numerous ideas, including reforms to the ACA's health insurance exchanges and the Medicare program. Its Medicaid reforms would hinge largely on a new way of funding long-term care.

Under Roy's model, all Medicaid beneficiaries receiving acute-care coverage would gradually be transferred from Medicaid onto a comparable “benchmark” plan offered through the reformed health insurance exchanges. Because the states and federal government jointly fund Medicaid but the federal government alone puts money into the exchanges, this shift would save the states about $1.2 trillion total over a decade, according to the proposal.

States in return would have sole responsibility for funding long-term care for their Medicaid populations. A “minority of states” would end up as “fiscal losers” under this plan, the report notes, but these states with large long-term care populations could receive federal grants during a transition period. In general, states would benefit by having more control over how to administer long-term care benefits, Roy argues. For instance, they would not have to petition for waivers to customize their Medicaid programs.

“This clean division of responsibilities will improve coverage for the poor; reduce waste, fraud and abuse; and provide fiscal certainty to state governments,” Roy wrote in the report's Executive Summary.

Roy's plan could form the “most realistic path” for Republicans seeking to overhaul the Affordable Care Act, according to Benjamin Domenech of conservative/libertarian think tank The Heartland Institute. GOP efforts to “repeal and replace” the healthcare law have been fruitless. Roy's plan has an advantage in that it keeps the basic ACA infrastructure in place while eliminating some major components that conservatives have objected to, including the mandate for all individuals to have health insurance, Domenech argued.

The University of Minnesota's Stephen T. Parente, Ph.D., MPH, modeled the plan's fiscal and coverage outcomes, and determined that it would reduce federal spending by $10.5 trillion over 30 years and expand coverage to 12 million people over the first decade. He said the Medicaid reforms would yield “the most dramatic improvement” in terms of provider access and health outcomes.

*Editor's Note: The original title of this article stated that Roy's plan would "eliminate" federal funding of long-term care. It has been changed to more clearly reflect that the funding would shift to the states.